There is growing urgency for Asian corporates to act swiftly in response to climate change. Last year, several governments across the region ramped up the implementation of policies aimed at transitioning to a zero-carbon economy, despite distractions such as geopolitical uncertainties and shocks. There is also renewed focus and demand for businesses to translate their climate pledges and targets into concrete and measurable action.
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Over the past year, another key theme that has stood out is consolidation. Companies that struggled to navigate a complex terrain of multiple climate-related frameworks and standards are expecting to see more harmonisation of rules and guidance. The year 2025 could see emerging opportunities for business leaders and board directors to integrate material climate considerations in their decision-making processes.
Here are eight major touchpoints that businesses will need to navigate in the new year:
1. New momentum for carbon markets deals
Voluntary carbon markets (VCMs) have been likened to the ‘Wild West’ for some time but outlook for the market looks set to be more upbeat in 2025 – with new rules and stronger fundamentals poised to move billions of dollars into new emissions-reduction projects – after a challenging period of consolidation and self-examination in the last few years.
A key development was the historic decision to finalise Article 6 at the COP29 climate summit in Baku, Azerbaijan, last November. Article 6.4, a section under the Paris Agreement which lays out the foundation for countries to trade carbon credits, has been one of the longest-standing disputes at the COP negotiations due to disagreements on the integrity of the rules, or how to ensure any promised emissions reductions are additional and can be easily verified.
Finalisation of the global playbook will enable governments to engage in carbon markets as buyers, potentially encouraging market stability and growth.
With the breakthrough, the world is likely to see governments enhancing their engagement in the VCM space, while implementing policies that continue to support greater standardisation and introducing market incentives to encourage private sector participation.
The Singapore government, a huge carbon markets proponent, for example, set up an alliance to increase the supply of state-approved credits for corporations looking to meet their net zero targets or offset their carbon tax obligations in June last year. (It also just signed a memoradum of understanding with neighbour Malaysia this week for international carbon trading under Article 6.2.) More jurisdictions across Southeast Asia are likely to look into aligning their carbon markets rules to regional and global standards.
Stanley Loh, permanent secretary, Singapore’s ministry of sustainability and environment (first from left) and sustainability and environment minister Grace Fu (second from left) signed an agreement with Zambia’s green economy and environment minister Mike Mposha (second from right) and permanent secretary Douty Chibamba. at the Singapore COP29 pavilion on 19 November 2024. Image: COP29 Singapore Pavilion
The year 2025 will also see the first global market-based carbon offsets initiative for a specific sector being implemented in phases, and this could drive new sources of demand. The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) scheme, launched by the International Civil Aviation Organization (ICAO) in 2016, will see carbon credits or sustainable aviation fuels being used to offset growth in aviation emissions above their baseline level, currently set at 85 per cent of 2019 emissions.
The renewed optimism for thriving carbon markets, however, does not mean diminishing scrutiny of projects for their integrity. Standard-setting bodies for carbon markets continue to face the daunting task of restoring confidence in the carbon credit market.
Last December, when carbon credit watchdog Integrity Council for the Voluntary Carbon Market (ICVCM), approved three rainforest methodologies as high quality, signalling that buyers can trust the credits represent real emission reductions, concerns were still raised.
Four experts advising on ICVCM’s Core Carbon Principles which set out what high-quality projects in the field should look like publicly attacked the group’s new rules, saying that they were not confident the projects covered by these methodologies will be done in the right way.
2. The mainstreaming of transition planning
The adoption rates for climate transition plans might still be low in Asia, but with investors’ demand to see tangible climate action that goes beyond target-setting, there is increasing awareness among businesses about the potential costs of failing to meet these expectations. This year, Asian corporates and boards are likely to see conversations on transition planning take centrestage.
According to a survey by investment research firm Morningstar, asset owners now view the transition to net zero emissions as the environmental factor most material to their decision-making, at 55 per cent, up from 52 per cent in 2023.
The trend is driven by the integration of reporting directives and frameworks into global standards like that of the International Sustainability Standards Board (ISSB). In June last year, ISSB signalled that transition planning disclosures is its new frontier for sustainability reporting.
As it takes over the United Kingdom-led Transition Plan Taskforce (TPT)’s responsibility of developing guidance and resources on preparing climate transition plans for companies across the world, it will seek to reduce fragmentation in information disclosed and consolidate existing standards. Asia’s businesses will need to get ready for a paradigm shift in sustainability reporting.
3. Climate change-induced weather events could hit businesses harder
Businesses increasingly recognise that extreme weather is a risk that needs to be understood. Many countries across Asia, including China, Japan and Indonesia, have reported records of 2024 being their hottest year; stronger attributional evidence of intensifying typhoons being linked to climate change in countries like the Philippines has also emerged. According to a World Weather Attribution study, climate change will increase the likelihood of at least three Category 3 to 5 typhoons hitting the Philippines in a year by 25 per cent.
Scientists predict that these weather extremes driven by global warming and other factors will persist in the coming year. The more noticeable and keenly felt impacts will likely drive stronger consensus among businesses on the economic impacts of these weather events. For example, investment analysis firm MSCI, in its latest climate risk survey published last October, highlighted that almost all of 350 financial market participants it surveyed agreed that changes in the physical environment due to global temperature rise would potentially bring about negative impacts to the economy.
Evacuees in Albay province, Bicol take shelter at a church in preparation for supertyphoon Man-yi, one of the six typhoons that hit the Philippines in November 2024. Image: Juanito Bantong / Greenpeace
Another trend that businesses need to watch is how intense heatwaves and typhoons are driving climate migration, where people are forced to leave their homes. This is particularly concerning in Southeast Asia, where almost a third of its population are vulnerable to extreme weather, wrote LLM Khanh-Linh Ta, founder of the Green Path Migrants project, a social movement to promote and educate the general public about displacement due to climate change.
It could impact strategic business decisions, such as on hiring. For example, Joey Khong, Asia Pacific manager of London-based consumer research firm Mintel Trends said “forward-thinking professionals” might choose to relocated to a different city or country to preserve the comfort and security for their families. The sinking of Indonesia’s metropolis of Jakarta, which has pushed the government to relocate its capital city to Nusantara, also sees businesses having to reconfigure their plans and potentially having to move their bases.
Environmental challenges will also have an impact on people’s purchasing decisions, with the risk of flooding, heatwaves and wildfires directly influencing where people buy property and travel, according to a survey in October by Mintel Trends.
The year 2024 also saw water stewardship initiatives becoming more prominent. This is particularly so in Asia, which has the most number of people living under water stress. Singapore’s president Tharman Shanmugaratnam, who is also co-chair of the Global Commission on the Economics of Water, said in October that improving water-related disclosures and building these requirements into carbon reporting frameworks should be viewed as a “low-hanging fruit”.
4. Greater scrutiny of technology-related and AI emissions
Environmental campaign groups have been exerting growing pressure on the technology sector to account for their emissions. Now, the rapid adoption of artificial intelligence (AI) is making investors wary about AI-related risks, ranging from its impact on the environment to social and human rights concerns.
Climate-conscious investors are also concerned that the substantial energy demands of AI technologies could divert green electricity from other critical sectors that need it more urgently to achieve their decarbonisation goals.
Big Tech’s ambitions are structurally challenged by the intermittent nature of renewable energy sources. In Southeast Asia, the expansion of data centres, face significant sustainability challenges.
5. Nuclear energy revival in Southeast Asia?
Some Southeast Asian nations are charging ahead with plans to start nuclear reactors by the next decade but as these new developments are happening at a rapid pace, lingering concerns about safety and ideological opposition to the use of nuclear have not been sufficiently addressed.
Indonesia declared in December that it is planning to build its first nuclear power plant on Kelasa island in Bangka Belitung province by 2028. The Philippines and South Korea signed an agreement in October to conduct a feasibility study to explore the revival of the stalled Bataan Nuclear Power Plant (BNPP).
Thailand, Vietnam and Malaysia are looking at exploring small modular nuclear reactor technology.
6. Rise of government-led policies combatting plastic pollution
More Asian countries banning or restricting waste imports, along with single-use plastics prohibitions, are expected in 2025.
The region is no stranger to such schemes to address the plastic crisis: Malaysia increased penalties for the illegal importation of electrical and electronic waste in July, while Indonesia and Thailand announced banning the import of plastic waste starting in 2025.
But there is now more impetus for government to lead on policy-making, especially as the global plastics treaty talks in Busan failed to reach an agreement in November.
The Indigenous People’s Forum on Plastics demand to be heard at the global plastics treaty meeting in Busan in November 2024. Image: Jessica Cheam / Eco-Business
“The developments come on the back of treaty negotiations, where alarms were raised about the health and human rights implications of plastic pollution, as well as the injustices the Global South faces,” said Arpita Bhagat, Asia Pacific plastics policy officer for nonprofit Global Alliance for Incinerator Alternatives (GAIA).
Bangladesh, India, Taiwan, Hong Kong, Bali in Indonesia and over 500 local governments in the Philippines like Quezon City also have bans in place for various single-use plastics. Marian Ledesma, zero waste campaigner for Greenpeace Southeast Asia, said there has been a notable increase in number of these initiatives; the breadth of their coverage is also wider.
As many as nine out of 10 people support a transition away from single-use plastic packaging to reusable and refillable packaging, while 75 per cent support a ban on single-use plastics, found a Greenpeace report released in April.
“With the worsening of plastic’s impacts on people and nature, we are seeing more governments, from local to national levels, enact policies designed to address plastic pollution,” Ledesma told Eco-Business.
“The increase in data and studies revealing the gravity of the plastic crisis has led to governments taking action to reduce plastic and enable sustainable alternatives, such as reuse and refill models,” she added.
7. Demand for electric vehicles will surge even with potential Trump 2.0 interference
China’s electric vehicle (EV) market will maintain its dominance in Southeast Asia, with more than 70 per cent of sales in the region coming mostly from Shenzen-headquartered carmaker BYD, compared to a mere four per cent share of the US-based Tesla in the first quarter of 2025.?
As EV sales surge in China, adoption of more environmentally friendly vehicles is stumbling in the US. Automobile makers and governments struggle to meet long-drawn commitments to bring down prices and install more charging station. The probelm is made worse by the presidential reelection of Donald Trump, who has openly advocated for fossil fuels and internal combustion engine (ICE) vehicles.
US investments in clean energy have focused primarily on domestic priorities. Outgoing president Joe Biden rolled out the Inflation Reduction Act (IRA), which redirected investment toward clean technology, with batteries making up the bulk of it.
As Trump plans to cut back the scope of the IRA and focus on local industries, China’s role in meeting Southeast Asia’s clean energy needs will likely grow.
8. New opportunities for capping of transport emissions
Sustainable fuel in the aviation and shipping industry is expected to be taken up by more firms in the coming year.
Several major airlines such as Cathay Pacific, Japan and Malaysian Airlines, have already re-committed this year to a target of ensuring 10 per cent sustainable aviation fuel (SAF) uptake by 2030, while the Association of Asia Pacific Airlines is striving for a 5 per cent SAF utilisation rate across member airlines.
This is a welcome development as commercial aviation is already responsible for two to three per cent of global carbon emissions. Air passenger numbers are forecasted to top five billion for the first time in 2025.
However, experts have noted that these new fuels currently account for only as little as about 0.2 per cent of all jet fuel used worldwide as of 2023. This comes hand in hand with overtourism which in turn encompasses five to right per cent of global emissions.
In the shipping sector, the International Maritime Organisation, is expected to approve a carbon levy in April this year.
A levy would force ship owners to pay for every tonne of greenhouse gases their vessels emit, making the use of more-polluting fuels, such as the current oil-based bunker fuel, more expensive. It would incentive the use of lower-emitting fuels like ammonia, biofuels, methanol and hydrogen.
In 2023, IMO member states failed to agree on absolute emission reduction targets by the middle of the century, but settled for reaching net-zero emissions “by or around 2050.”
This story is part of Eco-Business’ Asia Outlook 2025 series. Look out for other stories to come on key trends and developments to watch in the new year.
